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Unit 14: The Payment of Gratuity Act, 1972

14.5 Payment of Gratuity Notes

Section 3 authorises the appropriate government to appoint any officer as a controlling authority
for the administration of the Act. In Maharashtra, the labour courts in different localities are
notified as controlling authorities and the President, Industrial Court; is an appellate authority
under the Act.
Gratuity is payable to an employee on the termination of his employment after he has rendered
continuous service for not less than 5 years - on his superannuation; or on’ his retirement or
resignation; or on his death or disablement due to accident or disease. However, the completion
of 5 years of continuous service for earning gratuity is not necessary if the termination of the
employment of any employee is due to death or disablement. In case of death of the employee
gratuity is payable to his nominee or to the guardian of such nominee.
!

Caution For every completed year of service or apart, thereof its excess of six months, the
employer has to pay gratuity to an employee at the rate of 15 days wages based on the
rate of wages last drawn by the concerned employee. In the case of Piece-rated employee,
daily wages are computed on the average of the total wages received by him for a period
of 3 months immediately preceding the termination of his employment. For this purpose,
the wages paid for any overtime work will not be taken into account. In the case of an
employee employed in a seasonal establishment, and who is not so employed throughout
the year, the employer shall pay gratuity at the rate of 7 days wages for each season. The
amount of gratuity payable to an employee is not to exceed rupees three lakhs and fifty
thousand.

The right of employees to receive better terms of gratuity under any award or agreement or
contract with the employer is not taken away by this Act.

14.5.1 Forfeiture

If the services of an employee have been terminated for any act of willful omission or negligence
causing any damage or loss to, or destruction of, property belonging to the employer, his gratuity
can be forfeited to the extent of the damage or loss so caused to the employer. The gratuity payable
to an employee can be wholly forfeited, if the services of such employee have been terminated
for his riotous or disorderly conduct - or any other act of violence or an offence involving moral
turpitude committed by him in the, course of his employment.
14.5.2 Exemption

The Act provides for the grant of exemption from the operation of the Act to any person or class
of persons if they are in receipt of gratuity or pensionary benefits not less favourable than the
benefits conferred under the Act.

Did u know? Gratuity has been exempted from attachment in execution of any decree or
order of any Civil, Revenue or Criminal Court. This relief is aimed at providing payment
of gratuity to the person or persons entitled there to without being affected by any order of
attachment by a decree of any Court.

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